October 1999

Czech Republic Master Report

1. The regulatory background

The former Federal Ministry of PTT of Czechoslovakia prepared and in April 1992 the Federal Parliament approved the Amendments of the Telecommunications Act. In accordance with the EC GREEN PAPER, the Amendments of the Telecommunications Act provided the changes as follows:

• De-monopolizing and liberalization of telecommunications;
• Start with the privatization of telecommunications; and
• Separation of the state administration from economic activities.

The Amended Telecommunications Act separated the regulatory and operator functions and created the possibility to open the telecommunications services for the competition.

The Amended Telecommunications Act also opened the possibilities for the private sector access to the providing of telecommunication services for the public in the environment of the Czech market.

In accordance with the decision of the Czech Parliament, the Amended Telecommunications Act was accepted for the Czech Republic, too. The regulation of telecommunications was divided between two ministries. The Ministry of Transport and Communications [MTC] regulates an entrance of competitors into telecommunications. Prices for providing national services are regulated by the Ministry of Finance.

The state administration in the area of broadcasting, including the corresponding parts of the frequency spectrum, is ensured by the Council of the Czech Republic for Radio and Television Broadcasting. The Council, appointed by the Czech Parliament, particularly participates in the application of the Principles of the State policy relating to broadcasting, exercises the supervision on the observance of corresponding legislation, and together with the Czech Telecommunication Office [CTO] works out the plans of frequency spectrum utilization.

The responsibilities within the Ministry of Transport and Communications have been divided as follows:

The Czech Telecommunication Office

• Determines the basic conditions for the system of the state regulation in telecommunications and the rules of the licensing policy;
• Represents the Czech Republic in international organizations;
• Prepares international agreements;
• Determines the principles for the frequency spectrum management;
• Manages the preparation of national plans for the telecommunications networks, i.e. Numbering Plan, Noise Plan, Transmission Plan, Synchronization Plan; etc. And approves these documents;
• Determines the set of standards for telecommunications;
• Organizes the tender procedures for the public networks and services;
• Issues the authorizations for public networks and services;
• Approves prices for international telecommunication services;
• Issues licenses for the private networks and services;
• Issues licenses for other commercial activities in telecommunications;
• Issues permits to establish and operate transceivers;
• Works out the draft prices for the telecommunication services on the basis of the price regulation concept;
• Approves technical characteristics of telecommunication equipment and certificates their acceptability;
• Manages the frequency spectrum;
• Monitors the observance of parameters and licensing conditions of broadcasting radio-communication facilities;
• Performs the state administration and the state inspection in the field of telecommunications;
• Investigates cases of breaches, interference and jeopardizing of telecommunication networks and equipment;
• Makes decisions in administrative proceedings, concerning disputes involving users and operators of telecommunication networks and services;
• Deals with appeals against decisions made in the early stages of administrative proceedings.

Department of Telecommunications

• Determines the strategy of the State Telecommunication Policy,
• Accomplishes the activities of the state administration, concerning loans and governmental guarantees.

On the August 10, 1994 the Government of the Czech Republic approved the Main Principals of the State Telecommunication Policy. The fundamental ideas were as follows:

• to more than double the number of main telephone lines before 2000,
• to maintain the integrity of the operator SPT TELECOM, a.s,
• to enable the entry of the strategic partner to the joint-stock company SPT TELECOM a.s.,
• the tender for the strategic partner will be carried out until March 1995
• the State share in the equity of SPT TELECOM, a.s. will not fall below 51%
• the State regulatory framework will be fully completed by the 30 June 1995
• the tariff policy predicated on a tariff formula based on the development of the inflation and the correction coeficient will be completed by the 30 November 1994
• SPT TELECOM, a.s. will obtain the exclusiveness for providing long distance and international telephone services up to the year 2000
• In so called local networks the entry into business will be enabled also to other subjects
• Three licences for mobile telephone service in the GSM will be issued.

The practical implementation of the Main Principles of the State Telecommunications Policy is presented in the next table:

2. Telecommunication Services - Major Operators

In order to achieve the necessary improvement of the telecommunication services and to enable the privatisation of telecommunications a completely new operating environment had to be established. On January 1993, the former state enterprise Správa pošt a telekomunikací Praha was split into two new state enterprises as follows:

• Czech Post
• SPT TELECOM

Simultaneously, with increasing postal prices in October 1992, cross-subsidy of the operating loss on the postal services by telecommunications ended. As part of the on-going privatisation programme, certain former commercial subsidiaries, construction and assembly activities and some production activities were hived off and privatised separately.

SPT TELECOM, a.s is the major carrier of the infrastructure telecommunication network and the telephone service operator with the major role in some other telecommunication services. Its authorisation includes not only the permits to operate telecommunication facilities and networks and to provide telecommunication services but also duties concerning the universality of services, performing services for the state administration etc.

Czech Radiocommunications operates its networks for broadcasting and its radiocommunications transmission networks [wireless connections].

The privatisation of SPT TELECOM and Czech Radiocommunications has been done step by step. As the first step, the state joint-stock companies were established with the effect from the 1 January 1994. In the second wave of the voucher privatisation of the Czech economy that started at the beginning of 1994, both companies were privatised. 70% of stocks remained in the state ownership, 26% were set for individual shareholders, 3% for restitution, 1% for the National Property Fund.

In 1995, SPT TELECOM, a.s. increased its capital by issuing of new shares. 27% of total number of shares were sold to TelSource, a consortium, chosen by the Government, comprising PTT Telecom Netherlands [51%], Swiss Telecom [49%] and AT&T [know-how support].

Czech Radiocommunications had sought for a partner for the GSM. A consortium Tmobil, comprising DeTeMobil [84,55%], STET [12%], Telekomunikacní montáže Praha [1%], PVT Praha [0,7%] and Sporitelní kapitálová spolecnost [1,75%], won the tender and bought 49% of stocks. RadioMobil, the joint venture of Czech Radiocommunications and Tmobil, has got the one of two authorisations for provision of GSM services for 25 years.

EuroTel Praha operates with the public mobile radiotelephone network and provides further activities in the area of radiotelephone services. The joint venture EuroTel Praha was established in November 1990. SPT TELECOM, a.s. owns a 51% shares. The rest is owned by the Association Atlantic West BV, established for this purpose by the American companies Bell Atlantic International Inc. And US West International Inc.

EuroTel Praha has got exclusivity for the operation of the public mobile network [450 MHz] and for radiotelephony services on this network for 20 years, i.e. up to the year 2011. At the same time as RadioMobil, EuroTel Praha got the second of two authorisations for the provision of the GSM services, also for 20 years.

Development of the GSM networks of both operators continued even in1997. Both operators cover by the GSM networks over 90% of the population of the Czech Republic. By the end of the year 1997, EuroTel has 59 of roaming partners from 44 countries, RadioMobil concluded roaming agreements altogether with 75 operators from 52 countries. Faster development of the networks of both operators resulted, beside the increase of the number of subscribers, in the qualityt increase of the networks, improvement of an access to the networks and reduction of interruptions.

A comparision of these two operators to the date 31 December 1998 and a comparision with the previous period is given in the following table:

* licence will be issued in October 1999

2.1 Services Provided on the Base of Issued Authorisations for Provision of the Public Telephone

Based on the performed selection procedure in 1995, the Authorization for provision and operation of specified local networks [VMS] was issued to six business candidates in regards of 16 local networks [in addition to the previous two pilot projects].

CTO controlled in the course of the year the fulfilment of individual points of the Authorization, the specified commitments of the development and indicators of the quality of all holders of the Authorizations.

None of these six holders of this Authorization fulfilled specified tasks in the Authorization and by 31.December 1997 no holder has started provision of telecommunication services. One of the holders, the company Opatel, a.s., returned the issued Authorization [VSM Opava] by the letter from 29 October 1997.

2.2 Companies with Authorization to Provide Telecommunication Services in Local Areas

*/ 18 February 1998 the Authorization was cancelled at the holder’s request.

SPT TELECOM a.s., DATTEL a.s. and KABEL PLUS a.s. mostly fulfil the tasks with deadlines, resulting from the Authorization. Following table presents the outline of the number of telephone stations and capacities of local telephone exchanges [situation to the date 31 December 1997]:

	SPT TELECOM,a.s	DATTEL,a.s	KABEL PLUS,a.s.
Main telephone station/total -from that digital network - yearly increase	3 802 000 1 633 153 458 391	2138 2138 1192	2458 2458 1550
Main Telephone station/residential - from that digital network - yearly increase	2 219 303 1 007 598 346 047	369 369 176	1743 1743 1042
Capacity of local telephone Exchanges (number of extensions) from that analogue network -yearly increase -from that digital network -yearly increase	4 090 572 1 857 011 -242 101 2 233 561 938 708	2296 0 0 2296 840	6233 0 0 6233 148

Paging in the ERMES system

In the first half of 1997, a selection procedure was launched for a national operator of the ERMES system in the Czech Republic. Three companies took part, from whose the committee selected the company MULTITONE CZ, Ltd. On the basis of criteria specified beforehand. The second whole state operator was the already mentioned Radiokontakt OPERATOR, a.s., according to the afreements concluded in 1992.

Authorizations for provision of the public paging service were issued to both companiesin November 1997. The companz Radiokontakt OPERATOR, a.s. the joint venture of the Czech Radiocommunications and France Telecom, has already started an extension of it’s experimental network, the company MULTITONE CZ, Ltd. Shall start with provision of services on 31 May 1998 at the latest.

2.3 Regulatory Implementation

Issuance of the Authorizations/Permits for Provision of Telecommunication and Radiocommunication Services and for Operation of the Telecommunications Networks: In 1997 there were issued 106 decisions of permits for provision of telecommunication services, 21 supplements to the permits already issued and 7 permits were cancelled. Since 1990 till 31 December 1997, there were issued 396 permits [including supplements and cancellations] for provision of telecommunication services:

2.4 Permits for provision of the telecommunication services, issued in 1998

The joint-stock company SPT TELECOM was appointed in 1997 for the test operation of ISDN.

During 1997, a number of other general permits was issued, through which CTO carried on in simplifying and namely in reduction of administration of the licensing procedures. The following ones have been issued before the end of the year:

• GP-17/1997 – to physical and legal persons for provision of public telex servoces via the publicity accessible subscriber’s station,
• GP-18/1997 – for provision and operation of data radio stations, operated at non-specified frequencies in assigned bands,
• GP-19/1997 – for provision and operation of data radio stations, operated at assigned frequencies,
• GP-20/1997 – for provision and operation of mobile radio transmitters in radio networks of the licence holders for provision of non-public radio telephone services via networks of land mobile services [so called collective network],
• GP-21/1997 – for acquiring of radio transmitters serving for transmission of speech and non-speech signals,
• GP-22/1997 – for provision of services to enable an access to the INTERNET telecommunication network.

2.5 Legal regulations

Based on the task set by the working plan of the government for the second half of 1997, the Czech Telecommunication Office produced a draft of principles of the new Telecommunications Law. Out of date and partially non-functional legal arrangements of telecommunications guided the present representatives of the sub-committee for post and telecommunications of the economic committee of the House of Commons to the effort to speed up the legislative procedure. In line with the common intention to speed up fundametally the approval of the new Telecommunications Law, on the legal sounding of the law in question, representatives of CTO collaborated. After the chairman of the sub-committee mentioned took back his proposal, CTO is going to finish the subject intention of the law with utilisation of comments applied already for the legal sounding.

In the first quarter of 1997 there was concluded the broad general revision of internal regulations from the area of telecommuniactions, issued in the past periods having in mind to judge their usefulness and possible prolonged validity. In May 1997 CTO performed the first stage of cancellation of selected internal regulations from the telecommunication’s field, that did not suit the current situation in the telecommunications field as they were either out of date or not fully in accordance with generally binding legal regulations. The new verification stage to find out, whether other internal regulations are up-to-date, when considering the preparations of the new Telecommunications Law and it’s principles, took place before the end of 1997. It is intended to transform the abolished regulations into universal rules, corresponding to the present technical and legal situation on the telecommunication’s field, even from approaching the European laws.